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China, Hong Kong Stocks Slip as PBOC Freezes Lending Rates

Markets were surprised by central bank’s caution knocking optimism over Beijing’s pledges to support China’s slowing economy


Asia stock markets
Chinese manufacturing activity dropped last month at its fastest pace since the start of the pandemic. File photo: Reuters.

 

China and Hong stocks fell back on Wednesday after the central bank surprisingly kept its benchmark lending rates unchanged, despite frequent government pledges to support a slowing economy hit by the worst Covid-19 outbreak in two years.

The one-year loan prime rate (LPR) was kept at 3.70% and the five-year LPR was unchanged at 4.60%, which markets see as Beijing’s cautious approach to rolling out more easing measures.

“Due to limited space on cutting RRR (reserve requirement ratio) and rates, Beijing will increasingly focus on credit easing, especially on the local government financing and the property sector, the two conventional growth drivers,” Nomura said in a note.

 

Also on AF: Taiwan TV Station Apologises Over Report of Chinese Attack

 

China will step up financial support for technology innovation and ensure the security and stability of its supply chains, State TV cited a meeting chaired by President Xi Jinping as saying.

China’s central bank urged financial institutions to step up support for the contact-intensive service sector and small firms impacted by Covid, and vowed to keep property sector financing stable and orderly.

China’s blue-chip CSI300 index fell 1.6%, to 4,070.79, while the Hang Seng Index dropped 0.40% , or 83.09 points, to close at 20,944.67.

The Shanghai Composite Index fell 1.35%, or 42.98 points, to 3,151.05, while the Shenzhen Composite Index on China’s second exchange fell 1.71%, or 34.63 points, to 1,985.65.

Consumer staples edged up 0.5% and tourism firms gained 1.4%, while real estate developers slumped 5.8%.

Energy and machinery stocks fell 4.8% and 3.8%, respectively. New energy shares fell 4%, with battery giant Contemporary Amperex Technology Co (CATL) slumping 7.6% to end at a near 11-month low.

Tech giants listed in Hong Kong edged down 0.5%, while mainland property developers tumbled more than 5%.

Property managenment service provider Country Garden Service Holdings slumped more than 10% to become the biggest percentage decliner on the Hang Seng Index.

China’s largest offshore oil producer CNOOC Ltd fell 4.1% ahead of its A-share debut in Shanghai on Thursday.

 

Tokyo Follows Wall St Gains

Elsewhere in Asia, Tokyo stocks closed higher, helped by a cheaper yen and gains on Wall Street where the three main benchmarks had their best days in over a month, helped by several strong earnings results. The Nasdaq closed up 2.2%.

The benchmark Nikkei 225 index added 0.86%, or 232.76 points, to close at 27,217.85, while the broader Topix index rose 1.03%, or 19.45 points, to 1,915.15.

Indian stocks rose with Mumbai’s signature Nifty 50 index up 1.05%, or 177.90 points, to close at 17,136.55. Jakarta, Sydney and Taipei all inched upward while Seoul was flat.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, its first positive session in a week.

Further away, the STOXX index of 600 European companies gained 0.4% to 458.17 points. The MSCI all country stock index was 0.2% firmer.

In Europe, German producer prices hit a record high amid war in Ukraine.

Oil prices rebounded from sharp losses in the previous session as concerns about tighter supplies from Russia and Libya dominated.  Brent crude futures rose 1.2% to $108.55 a barrel.

Spot gold fell 0.4% to its lowest in a week dragged down by higher yields. 

 

Key figures around 0830 GMT

Tokyo – Nikkei 225 > UP 0.86% at 27,217.85 (close)

Shanghai – Composite > DOWN 1.35% at 3,151.05 (close)

Hong Kong – Hang Seng Index > DOWN 0.40% at 20,944.67 (close)

Brent North Sea crude > UP 1.32% at $108.67 per barrel

West Texas Intermediate > UP 1.40% at $104.00 per barrel

New York – Dow > UP 1.5% at 34,911.20 (Tuesday close)

London – FTSE 100 > UP 0.12% at 7,610.32 points (Tuesday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

China’s Yuan Falls to Six-Month Low Against US Dollar

Shanghai Covid Hopes Rise With No New Cases in Two Districts

 

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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